What does taxes withheld mean

what does taxes withheld mean

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W-4 Basics

When you take a new job, your employer must give you tax Form W-4 to set up your tax withholding. When you fill out your W-4, you have the opportunity to claim allowances based upon various circumstances such as whether you are married, how many jobs you have and whether you have dependent children. If no allowances apply to you, you might claim zero on your tax return. The fewer allowances you claim, the greater the amount of income you will have withheld for taxes.


When you claim zero allowances on your tax return, your employer will withhold a larger portion of your income to pay your income tax liability. Claiming zero makes it less likely that you will end up owing additional taxes to the IRS when you file your tax return at the end of the year. In some cases, claiming zero might entitle you to a tax refund when you file your tax return.


Claiming zero allowances on you W-4 means you will

receive less income in each paycheck. Even though you might get a large tax refund by claiming zero, it is better actually receive your money as pay than to get it back months after you earn it because money can be saved or invested to earn a return over time. If you only work one job and cannot be claimed as a dependent on someone else's tax return, you will likely be able to claim at least one allowance without owing additional taxes when you file your tax return.


Taxpayers can change the number of allowances claimed by requesting and submitting a new W-4 form. The IRS states that you can increase the number of allowances on line 5 of Form W-4. You should consider increasing your allowances from zero if you consistently receive large tax refunds or if your life circumstances have changed since you took a job. For example, if you have gotten married and had children since claiming zero allowances on your W-4, you might have too much money withheld from your income.

Source: ehow.com

Category: Taxes

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